Grechyna, Daryna (2015): Quantifying the Impact of Political Frictions on Public Policy.
This is the latest version of this item.
Preview |
PDF
MPRA_paper_68918.pdf Download (1MB) | Preview |
Abstract
We study the role of political frictions in fiscal policy outcomes. We propose a simple model of fiscal policy that combines a lack of commitment by the government, political turnover, and another political friction which can be interpreted either as political polarization or as public rent-seeking. We show that political turnover increases public debt levels, while political polarization or public rent-seeking lead to higher public spending. We evaluate the importance of different political frictions for fiscal policy outcomes using a sample of twenty developed countries. We find that the presence of political turnover is crucial for accounting for the variation in public debt levels and that public corruption measures outperform the political polarization measures in explaining the variation in fiscal variables.
| Item Type: | MPRA Paper |
|---|---|
| Original Title: | Quantifying the Impact of Political Frictions on Public Policy |
| Language: | English |
| Keywords: | fiscal policy; political turnover; political polarization; public rent-seeking. |
| Subjects: | E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy H - Public Economics > H1 - Structure and Scope of Government > H11 - Structure, Scope, and Performance of Government K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K42 - Illegal Behavior and the Enforcement of Law P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P26 - Political Economy ; Property Rights |
| Item ID: | 68918 |
| Depositing User: | Daryna Grechyna |
| Date Deposited: | 20 Jan 2016 05:27 |
| Last Modified: | 03 Oct 2019 07:48 |
| References: | 1.Acemoglu, D., Golosov M., Tsyvinski O. 2008a. Markets Versus Governments. Journal of Monetary Economics, 55 (1): 159-189. 2.Acemoglu, D., Golosov M., Tsyvinski O. 2008b. Political Economy of Mechanisms. Econometrica, 76 (3): 619-641. 3.Acemoglu, D., Golosov M., Tsyvinski O. 2011a. Power Fluctuations and Political Economy. Journal of Economic Theory, 146 (3): 1009--1041. 4.Acemoglu, D., Golosov M., Tsyvinski O. 2011b. Political Economy of Ramsey Taxation. Journal of Public Economics, 95 (7-8): 467-475. 5.Aguiar, M., M. Amador, and G. Gopinath. 2009. Investment cycles and sovereign debt overhang. Review of Economic Studies, 76 (1): 1-31. 6.Aguiar, M. and M. Amador. 2011. Growth in the Shadow of Expropriation. The Quarterly Journal of Economics, 126 (2): 651-697. 7.Ales L., P. Maziero, P. Yared. 2014. A theory of political and economic cycles. Journal of Economic Theory, 153: 224--251. 8.Alesina, A., and Tabellini, G., 1990. A Positive Theory of Fiscal Deficits and Government Debt. Review of Economic Studies, 57 (3): 403-414. 9.Azzimonti, M., 2011. Barriers to investment in polarized societies. American Economic Review, 101 (5), 2182--2204. 10.Azzimonti, M., 2014. The dynamics of public investment under persistent electoral advantage. Review of Economic Dynamics, In Press. 11.Battaglini M., Coate S., 2008. A Dynamic Theory of Public Spending, Taxation, and Debt. American Economic Review, 98 (1): 201-236. 12.Caballero R., P. Yared, 2010. Future rent-seeking and current public savings. Journal of International Economics, 82 (2): 124-136. 13.Debortoli, D, Nunes, R., 2010. Fiscal policy under loose commitment. Journal of Economic Theory, 145 (3): 1005-1032. 14.Debortoli, D., Nunes, R., 2013. Lack of commitment and the level of debt. Journal of the European Economic Association, 11 (5): 1053-1078. 15.Klein, P., Krusell, P., & Rios-Rull, J. V., 2008. Time-consistent public policy. The Review of Economic Studies, 75 (3), 789-808. 16.Lindqvist, E., P. Ostling. 2010. Political Polarization and the Size of Government. American Political Science Review, 104 (3): 543-565. 17.Lucas, R. E., Stokey N. L. 1983. Optimal fiscal and monetary policy in an economy without capital, Journal of Monetary Economics, 12 (1): 55--93. 18.Ortigueira S., J. Pereira, P. Pichler, 2012. Markov-perfect optimal fiscal policy: the case of unbalanced budgets. Economics Working Papers we1230, Universidad Carlos III, Departamento de EconomÃa. 19.Persson, T. and Svensson, L., 1989. Why a Stubborn Conservative would Run a Deficit: Policy with Time-Inconsistent Preferences. The Quarterly Journal of Economics, 104 (2): 325-345. 20.Teorell, J., St. Dahlberg, S. Holmberg, Bo Rothstein, F. Hartmann & R. Svensson. 2015. The Quality of Government Standard Dataset, version Jan15. University of Gothenburg: The Quality of Government Institute, http://www.qog.pol.gu.se. 21.Yared P., 2010. Politicians, Taxes and Debt. Review of Economic Studies, 77 (2): 806-840. |
| URI: | https://mpra.ub.uni-muenchen.de/id/eprint/68918 |
Available Versions of this Item
-
Quantifying the Impact of Political Frictions on Public Policy. (deposited 26 Jun 2015 10:32)
- Quantifying the Impact of Political Frictions on Public Policy. (deposited 20 Jan 2016 05:27) [Currently Displayed]
All papers reproduced by permission. Reproduction and distribution subject to the approval of the copyright owners.
 |
View Item |
